Tutorial Forex

Do you know exactly what a forex lot is? If you trade Forex you need to understand all of the language and terms exactly. Lots are the base unit size of any given forex transaction. You may have heard “I will take 5 lots of the euro against the British pound”. In general, one standard lot is equivalent to 100,000 units of the base currency.

You may remember that the base currency is essentially just the first currency of a currency pair, for example in the EUR/USD currency pair the base currency is the EUR and the ‘quote’ currency is the USD; this means that you if you buy 1 lot (100,000 EUR) you will pay for it in USD and if you buy 5 lots of the Euro as stated earlier, you would pay for 500,000 Euros using the equivalent amount of British pounds.

You may remember that the base currency is essentially just the first currency of a currency pair, for example in the EUR/USD currency pair the base currency is the EUR and the ‘quote’ currency is the USD; this means that you if you buy 1 lot (100,000 EUR) you will pay for it in USD and if you buy 5 lots of the Euro as stated earlier, you would pay for 500,000 Euros using the equivalent amount of British pounds.

So now that we know what it is, what is the significance or use of all this? Okay, so if you have a 10,000 dollar account with your favorite forex broker, who gives you leverage of 100:1 (for every dollar in your account you control 100 dollars worth of any currency in the forex market) you can gain full control of a maximum of 10 lots of any base currency in the market. But if you have a micro account but want to control lots 100,000 units in size, you will definitely need to increase the amount of money in your account. Do not make the erroneous decision to use large leverage to control lots greater than permissible for your account type as the risk just isn’t worth it.

Start out trading forex market currencies with a small number of lots. A good size for beginners is between 1 and 3. With time you may find that this is plenty to be a successful trader in the market. After you gain experience and have more money in your account, you can increase the size and number of your lots following your risk management plan.

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With growing numbers of corporations doing business around the world, the advent of international currency trading is exploded. The currency market is the most liquid market in the world. Currencies can be traded 24 hours a day, 5 days a week at some trading center in the world. Speculators make up 70% of the currency trading market.

International currency trading is a very competitive arena. The best and most successful traders are those who have educated themselves in the subject. There are many books and publications that every trader should own. There are also currency trading courses that can help in developing your trading skill. Taking a good course can help you get a real feel for how trading is done. It is recommended that all those entering the currency market take a quality trading course.

Managing the high degree of risk in the international currency trading market is one other things that a trader must do. Not only are there many experienced professionals in the market, the leverage used with trading in this market can significantly increase the level of risk you must be willing to accept. Your broker will loan you the major portion of your trading capital. You must control this risk as you trade.

When trading currencies they will come in pairs. You will trade one currency against the other. Common currency pairs are the EUR/USD, which is the euro against the dollar. The GBP/USD is the British pound against the dollar. The pair USD/JPY is the dollar trading against the Japanese yen. The fourth most common pair is the USD/CHF, the dollar and the Swiss franc. The first currency is the base and the second one is the quote currency. You may see EUR/USD $1.43. This means that each euro will cost $1.43. If you believe that the euro will go up against the dollar, you purchase the euro with dollars. You hopefully can sell the euro at a later date at a higher price. If you think the euro will drop in price against the dollar you would sell instead of buying.

Nearly 70% of the participants in the international currency trading markets are speculators. They are in almost every group in the market. The largest group of speculators is made up of the inter-banks. These are the large investment banking firms. They trade for their customers and for themselves. They make up about 50% of the daily volume. Hedge funds are a growing group in the market. They can use more expanded and aggressive investing strategies than mutual funds so they can buy and sell currencies in order to allow their customers to benefit from price moves in currencies. Governments use the currency market as a way to maintain balance in their monetary systems. A rapidly growing sector of the market is the individual trader. The volume of trading makes it easier for the individual trader to be in this market.

Understanding what things cause currency prices to move up and down is one of the most important factors in becoming a success in currency trading. Things to consider are budget deficits and surpluses of governments. A country’s level of employment is another area to look at. Interest rates and the supply of the currency in use are other factors. The political environment needs to be evaluated. There are other issues to look at but these are some of the more important ones.

Understanding how to use charts to help you identify price trends will greatly increase your changes of making money from your trading activity. The two currency prices are plotted against each other to show a picture of past trading behavior. This picture can help you make more accurate decisions about future trends.

Becoming one of the top money-makers in the international currency trading arena is no easy task. With a high level of education and a disiplined trading style your chances for success are greatly increased.

You NEED to check out international currency trading if you are SERIOUS about international currency trading!

Many people are not aware that commodities as an asset class has a lot of potential especially in the 21st century. It is being predicted that the 21st century belongs to the commodities. If you are interested in investing in commodities than you can invest in a commodity mutual fund!

Just buy the shares of the commodity mutual fund and let its NAV appreciate before you can sell for a capital gain. This is the simplest way for you to get involved in investing in commodities as the mutual fund portfolio management will be done by a professional manager and you have to do nothing.

There is another investment vehicle that is really hot right now with the public. ETFs started off some three decades back but became highly popular as investment vehicles in such a short time. Now, you must have heard about the Exchange Traded Funds (ETFs). ETFs are really hot investments these days. There are a number of ETFs that invest in commodities.

Now the good thing about investing in ETFs is that they give you the diversification benefits of a mutual fund with very low fees something like 0.7% as compared to 2-4% of the mutual fund. Driven by the growing demand of commodities by the investors many financial institutions are now offering Commodity ETFs.

So unlike a mutual fund whose net asset value is calculated at the end of the day and the shares of mutual fund cannot be traded during the day, you can go both long or short on ETFs all the time. Something you cannot do with a mutual fund! ETFs have the added benefit of being able to trade like stocks giving you the powerful combination of diversification and liquidity.

This diversification plus liquidity benefit makes an ETF a better investment tool as compared to the mutual fund and the stocks. Now, you can find thousands of ETFs in the market on different market sectors, stock indexes, currencies, commodities and so on.

The Deutsche Bank Commodity Index Tracking Fund is listed on AMEX and tracks the Deutsche Bank Liquid Commodity Index. This index is based on a basket of six commodities: light sweet crude oil, heating oil, gold, aluminum, corn and wheat. The first Commodity ETF in US was launched by Deutsche Bank in the start of 2006.

As always what you need is an ETF that tracks an individual commodity. Now, every month a new ETF gets launched. There are a number of Commodity ETFs that track individual commodities like crude oil, gold and silver. Do your research on Commodity ETFs, you may find a good investment. Now the ETF of our example invests directly in the commodity futures contract. If you have trade futures than you must know that futures are highly volatile. Now one of the downsides of investing in this Commodity ETFs is that it can be fairly volatile as it is based on commodity futures contracts that get rolled monthly. Another downside to this Commodity ETF is that it is based on a basket of six commodities only.

Mr. Ahmad Hassam is a Harvard University Graduate. Trade Dow Futures . Learn Commodity Trading !

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